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Report:

Out of the Shadows

In Massachusetts, quasi-public agencies perform vital government functions, delivering essential services such as operating public buses and rail systems, delivering drinking water and managing public pensions. They employ thousands of people and sometimes control billion-dollar budgets. Because they are not directly accountable to the legislature and exempt from many kinds of public oversight, these agencies should make their decisions and budgets especially open to public scrutiny. Detailed information should be publicly disclosed and readily available about expenditures, revenue and debt, as well as about outside contracts and internal governance. The Internet makes it easy to provide ready access to this information at minimal cost.

Unfortunately, quasi-public authorities operate largely under the radar in Massachusetts. Quasi-publics fail to disclose basic information online about their spending and revenues. When information is available, it is difficult for the public to access.

This study uses data provided to us by the quasi-public agencies in response to public records requests, as well as public audits and online searches, to examine the size and scope of quasi-public agencies in Massachusetts and the extent to which their budgets and decision-making are open to the public.

Quasi-public agencies are a large and important part of government operations in the Commonwealth.

• Quasi-public agencies are publicly chartered bodies that perform some public function and are controlled by government-appointed boards. They are not fully public because they operate independently of the legislative and executive branches and do not principally depend on state general funds for operation. They cannot be classified as private entities because they are governed by state appointees and are typically endowed with public powers to collect fees or other revenues, as well as to perform public functions.

• A total of 42 quasi-public agencies operate on the state or regional level in Massachusetts, ranging in size from more than 6,000 employees to only six.

• For the 41 quasi-public agencies for which some budget information could be obtained, combined annual revenues amounted to $8.76 billion, according to available information that is sometimes a couple of years old. Some authorities, such as the Massachusetts Teacher Retirement System, oversee over $2 billion in outlays annually.

• By comparison, the state budget of Massachusetts was almost $27 billion in fiscal year 2008, the current reference year for most available quasi-public data. In other words, quasi-public agencies represent almost 33 percent of additional government activity that is exempt from even limited normal transparency and oversight rules. While the Commonwealth held $19 billion in long-term outstanding debt as of March 2008, figures disclosed by the Executive Office of Administration for 12 large quasi-public agencies show $29 billion in additional debt at that time.

Quasi-public agencies in the Commonwealth often disclose limited or no information about their budget or operations online, leaving citizens in the dark.

• While all the agencies in this report have Web sites, only 15 provide relatively complete budgetary information. The state’s budget Web site (mass.gov), the central portal for information on Massachusetts government finances, fails to provide budget information on any quasi-public agencies.

• Some quasi-public agencies appear to perform as models of efficiency and good government; others have seen repeated scandals and cost overruns.

• Concerns about lack of public accountability at quasi-public agencies have been raised before. In fact, a quarter century ago, the Massachusetts Senate convened a commission to examine how quasi-public agencies were being used to circumvent laws to keep track of budget spending and debt. The Commission’s recommendations included “that uniform, regular reporting requirements be imposed and enforced on all authorities” and that the Governor’s office disclose all off-budget spending and revenues. Only limited reforms have taken place during the intervening 25 years.

Budget transparency can increase efficiency and prevent corruption or other potential abuse at quasi-public agencies.

• Budget transparency allows citizens and elected officials to monitor the actions of quasi-public agencies and hold them accountable. Improved budget reporting is the most commonly cited way respondents say government can demonstrate greater accountability, especially through open disclosure and clear reporting.

• At least 30 states have established budget transparency Web sites that give users access to checkbook –level data on government spending and allow users to make directed searches. Unlike Massachusetts, New York’s state budget Web site includes budget information on quasi-public agencies.

• Budget transparency Web sites with checkbook-level disclosure have proven to be a cheap tool to monitor and improve government spending. Missouri’s Web site, which is updated daily and allows citizens to search state expenditures totaling over $20 billion a year, was created entirely with existing staff and revenues.

• Budget transparency Web sites can save governments money. In Texas, the Comptroller was able to utilize the transparency Web site to quickly save $2.3 million from a variety of efficiencies and cost savings.

• Citizens have actively used existing budget transparency sites to monitor government spending. Less than a year after its launch, the Missouri budget transparency Web site received more than six million hits.

Massachusetts has made some strides toward improving government budget transparency, but quasi-publics have been exempt from these efforts.

The Commonwealth’s cutting-edge procurement system already puts some government contracts online, but not those of quasi-publics. Massachusetts has been a leader in publicly disclosing information about spending of stimulus funds from the federal American Recovery and Reinvestment Act by posting all contracts online. This public disclosure has not extended to quasi-publics. Citizens increasingly expect that government expenditures will be posted online and easily accessible through a Google-like search function. It is important that independent agencies are included in such transparency.

Massachusetts must hold quasi-public agencies to higher standards of transparency and accountability.

• The Commonwealth’s centralized Web site, mass.gov, should provide budget information on all government organizations and agencies, including quasi-publics, modeled on best practices established by at least 30 other states.

• In addition to information about individual direct expenditures, often called checkbook-level transparency, online budget disclosure should include detailed budgetary information on all revenue, the issuance of private revenue bonds, compensation for board members, subsidies, discretionary spending, and contracts or grants given to private entities.

• Minutes of board meetings should be posted on-line, as should the qualifications of board members and their compensation for serving on the board.

• Massachusetts should consider establishing oversight boards to monitor the actions of quasi-public agencies and hold them accountable.

• Contracting at quasi-public agencies should be done through transparent statewide procurement systems, which could most easily be accomplished by posting all procurement through the state’s Comm-PASS system. Doing so would enable these entities to take advantage of bulk ordering discounts enjoyed by other state departments, cities and towns.

• Quasi-publics should be barred from hiring lobbyists. As part of the government themselves, they should not use tax dollars to influence legislation or decisions by the Governor’s office. The Governor of New Jersey in February 2010 ordered all state agencies, authorities, boards and commissions to stop hiring lobbyists, and Governor Patrick has included a similar proposal in the FY2011 budget.